Smaller companies account for around 66%* of all listed companies and offer a wealth of choice to investors. Relative to larger peers, they typically provide exposure to:
- Companies that generate a higher proportion of revenues from local markets
- An alternative set of risks
- Companies with the potential to grow rapidly
These distinct features provide strong diversification benefits when added to a large-cap equity portfolio. Smaller companies also tend to attract less analyst coverage than their larger peers. This means there may be greater and more frequent discrepancies between their fundamentals and their market valuations. This creates a rich environment for fundamental, active stock-pickers such as ourselves. At ASI, we offer local investors both Australian and Global small-cap equity funds. We believe stock-specific insights drive returns. As active investors, we therefore build our portfolios from the bottom up. This research-intensive process gives our clients direct access to our best small-cap investment ideas.
*Source: Stocks in MSCI ACWI Small Cap as a percentage of stocks in MSCI ACWI Small Cap and MSCI ACWI. As at end June 2020
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